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The Return of Keynesian Economics,
This review is from: Keynes: The Return of the Master (Paperback)Given that macroeconomists have been thinking about the world's economy since the late eighteenth century, an impartial observer could be forgiven for assuming that the field had reached some kind of a consensus in over 200 years.
They couldn't be more wrong.
The twentieth century saw a great tug-of-war between two separate schools of thought. In the blue corner, stand the economists who see the economy as a well oiled machine, instantly responding to exogenous shocks by reaching a new satisfactory equilibrium -- the classical economists and their latter day equivalent, the rational expectations crowd and real business cycle theorists.
In the red corner, stand Keynes and his myriad followers. When puzzling over the Great Depression, Keynes created a new model of macroeconomics: which stressed the imperfections and frictions in the economic machine that could keep the economy in an unsatisfactory rut for years. These frictions allowed for a role for government: to expand the money supply, cut taxes, and increase spending in the face of recession. Much of this has become modern-day common sense policy, but he was opposed by President Hoover in the U.S., and the British Treasury who insisted that a balanced government budget laid the best foundations for growth.
Robert Skidelsky traces out this theoretical tug-of-war, and explains how the current crisis calls for, "Keynes: The Return of the Master". He also explains how this war was an overtly political one. The modern day economists who wanted to overturn Keynes were mostly conservatives with an innate distrust of government. The modern day neo-Keynesians, such as Nobel prize winners George Akerlof and Joseph Stiglitz, are largely liberals, who emphasise that markets have imperfections and failures as well as governments.
This short book is all about Keynes's ideas, and their enduring relevance in the 21st century. For a biography of Keynes the man, try Peter Clarke - Keynes.